July 19, 2022

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TOGETHER WITH

Good Tuesday to you. The number of travelers reporting stranded luggage this summer has increased. Can you guess by what percent that figure has jumped since 2019? a. 15%, b. 30%, c. 45%. Follow the wave 🌊 below for the answer.

Zooming in on the money topics for today: 🔎

Commodity prices are finally dropping
Lessons learned from prior bear markets
Keeping your summer budget reasonable

🌞 The Finny team will be taking a two-week summer break starting next week. So after this Thursday's edition, The Gist will resume on Tuesday, August 9th! Any questions or feedback, email us at feedback@askfinny.com.

COMMODITIES

Commodity Prices Are Finally Dropping

Commodities have drawn an unusual amount of attention over the last couple years, as this typically mundane sector was one of the primary benefactors of the pandemic’s rippling implications.

Commodity prices are finally slipping a bit though, but that might not be exclusively good news.

The skinny

The backstory: Crimped supply chains and whipsawing demand back in 2020 sent prices sky high just as quickly as they’d plummeted initially. Since then commodity prices have remained relatively elevated thanks to various catalysts—economic reopening, market uncertainty, war and economic sanctions—keeping costs up on things like lumber, oil, metals, and even soft commodities (goods that are grown vs. mined, such as coffee, wheat, corn, fruits, etc.).
Prices rise: In the first half of this year, the Bloomberg Commodity Index rallied more than 20%, largely driven by the rise in energy prices (44.5%), agricultural goods (20.5%) and industrial metals (17.6%). As the globe fears the economic ramifications of the war in Ukraine, the impacts have undeniably been felt in prices throughout the world—whether it be in basic foods or insanely expensive gas.
Current state: Demand for gasoline is down, and subsequently so is the price of crude. Rising interest rates and high prices have homebuyers finally growing a bit weary too, resulting in lower demand for lumber. Aggregate demand for metals is also declining as overall growth softens. Other key commodities like copper remained relatively lofty through April of this year, but their prices have since fallen drastically, usually a sign that investors are bearish about the economy.

The potential meaning

Slowing demand: Things have gotten insanely expensive in certain areas like food, gas and rent. Even a stronger dollar can’t chase these prices forever, and it seems like we’re entering somewhat of a contractionary period in terms of consumer demand too—right in lockstep with the Fed, which has already said they’re willing to risk a recession to control inflation.
Flagging for a recession: Slumping commodity prices can oftentimes be a telltale sign of a pending recession, or an indication that we’re already in one. According to a recent Bloomberg survey, 47.5% of economists believe the economy is headed toward recession, a 17.5% increase from last month as persistent inflation and widespread layoffs fuel recession fears.
It might not be all bad: Recessions and slow growth are often painted as doom and gloom, but that’s not always the case. In a situation like this, a little reset to help curb prices and get inflation under control might actually be a good thing in the big picture.

Take this related lesson on this topic and earn Dibs 🟡 while you're at it:

Investing in Commodities

Advanced Investing

8 mins

INVESTING

Lessons Learned From Prior Bear Markets

History doesn’t always repeat itself, but it does often rhyme. So when it comes to investing in bear markets, it’s helpful to look to past bear markets to guide us now as we navigate the markets.

Bear market lessons learned

The drop: The average bear market decline is about 36%, whereas bull markets return an average of 114%, so eventually it’s usually worth holding steady, right?
The frequency: Historically speaking, although bear markets have become less common in recent years, their long-term average still has them striking roughly every 3.6 years, making them about as common as a cold and nothing to be too fearful of.
Positivity wins out: If you’re invested for 50 years, then based on averages, you can reasonably anticipate weathering about 14 bear markets. Worry not though, because in the end, markets are still positive about 78% of the time.
Be patient: The average bear market lasts about 289 days or almost 10 months, but that clock only starts once the market is down more than 20% from its previous high. We crossed that 20% line on the S&P 500 a little more than a month ago and have since been bouncing above and below as markets weigh the events at hand. So, what does that mean? No one knows for certain, but we might still have a ways to go.
Don’t be fooled: Big, flamboyant green days are very common in bear markets as volatility takes a hike and the pent-up desire to run often gets loose on some positive news, only to be put back in check shortly thereafter. These are relief rallies and false breakouts, and it’s important not to be fooled by them and to remain objective and unemotional.

Take this related lesson on this topic and earn Dibs 🟡 while you're at it:

Bear Markets & Volatility

Investing Basics

5 mins

MONEY TIPS

Keeping Your Summer Budget Reasonable

Keeping a reasonable summertime budget with vacations included is hard enough in any given year, and almost downright impossible when fuel is so expensive and inflation is setting records.

Nevertheless, we should try, right? Even though things might be defeatingly pricey out there, when the alternative is to give in and rack up debt, our only choice is to get creative and combat costs any way we can.

3 tips to keep your summer spending in check

Skip peak seasons: Summer vacations can be a little prototypical and cliche—everyone else is traveling too, it’s crowded, hot, and expensive. So why not just put it off? Flying, for example, during “shoulder seasons" or in-between times like late spring or early fall instead of right smack in the middle of summer is often notably cheaper, not to mention less stressful too.
Plan ahead and say no: Even if you’re a master budget maker, expenses can still easily overflow when last-minute plans take control of your life and your wallet. If a tantalizing, costly opportunity comes up that isn’t budgeted for and you know it’ll mess up your finances, just say no. Plan ahead for your fun and your expenses to the extent you can.
Save in advance: Okay so, this one's for next summer, or… any upcoming season where you’re planning a trip or some fun. Even if you’ve already got the money for said fun, set aside an additional savings bucket for “excess fun money” on top of that, because last-minute expenses always arise, and anything leftover can be put toward the next one.

Take this related lesson on this topic and earn Dibs 🟡 while you're at it:

Budgeting Basics

Budgeting & Saving

6 mins

🔥 TODAY'S MOVERS & SHAKERS

Apellis Pharmaceuticals (+22.9%) as the FDA has granted priority review to the company's marketing application seeking approval for their lead product for age-related macular degeneration, an eye disorder.
IBM (-6.2%) shares are down after beating top- and bottom-line estimates for Q2 but warning of a $3.5 billion impact to future earnings because of the strong USD.
Bitcoin (+0.98%) to $22,662.00 (1D)
Ethereum (-3.8%) to $1,522.26 (1D)

This commentary is as of 8:30 am PDT.

🌊 BY THE WAY

🏖️ Answer: The number of travelers reporting stranded luggage this summer jumped 30% from 2019, according to Spanish insurer Mapfre SA (Bloomberg)

🥤 A can of Coca-Cola for $13? Prices are rising on one of Europe’s most popular islands (CNBC)
🤔 ICYMI. Why is the value of the US dollar is going up? (Finny)
💳 Does Klarna build credit? You might be surprised (Tally)
🪙 Finny lesson of the day⁠—Get a better understanding of the relationship between gold and the US dollar:

Gold & the US Dollar

Advanced Investing

6 mins

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The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. Finny does not offer investment and stock advice or endorsements. The Gist content team: Austin Payne, Chihee Kim.

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